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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: zonder who wrote (29790)	5/11/2005 10:33:38 AM
From: mishedlo	Respond to of 116555

BoE's King highlights slowing consumption as real threat to UK economy Wednesday, May 11, 2005 10:48:21 AM afxpress.com BoE's King highlights slowing consumption as real threat to UK economy UPDATE (adds King comments from press conference) LONDON (AFX) - Bank of England governor Mervyn King highlighted today that the slowdown in retail spending is a real threat to the UK economy "The slowdown in retail spending is more than an erratic movement around the turn of the year," he said in comments following the release of the central bank's quarterly economic projections He cited profit warnings from a number of retailers, business surveys, reports from the high street and official retail sales data all pointing to an easing of consumer spending "The evidence now suggests that the contribution of consumption to activity growth is lower than for some years," he said "As a result, the prospects for consumption are a key source of uncertainty surrounding the central projection," he said Overall, despite the unease, King said household spending growth is likely to recover but to remain lower than recent years In its quarterly forecasts for growth and inflation, the BoE said it expects CPI inflation to rise above the 2 pct target in the near term due to temporary factors before settling back to the 2 pct level over the two year horizon The central bank also said the outlook for GDP growth "remains close to trend over the next three years" but warned that the risks are "on the downside" as a result of slowing consumption growth, an easing in government spending and weaker overseas demand for UK exports King said the chances of the economy evolving exactly in line with forecasts are "very small", adding that the real issue is the uncertainty surrounding the predictions A lot will depend on upcoming data, he said "(The MPC) stands ready to respond to the data as they unfold, in order to meet the inflation target in the medium term," King said He added that downside risks to inflation are likely come from slower than expected overall economic growth However, the governor dismissed talk that the UK economy is suffering a bout of "stagflation" where growth is falling and inflation is rising. He noted that growth in the first quarter remains near trend and inflation is below target King noted that sky-high oil prices have not driven prices and wages higher "So far there have been no signs of second round effects," he said There have been mounting fears in recent days that UK growth is on the slide with the manufacturing sector on the brink of recession and news that high street spending around Easter fell by its biggest amount in ten years King stressed that the bank had news of the sharp 1.6 pct slump in manufacturing output at its disposal when making its forecasts He added that falls in consumption reflect the drop in disposable incomes after taxes and slower growth in house prices He repeated the Inflation Report forecast that consumer spending is likely to recover, though to levels below recent years He said consumption growth is likely to be around 1/2 pct a quarter On house prices, King said they probably have been higher in the last three quarters than had been anticipated in the February Inflation Report